Supply and Demand:
Baltimore’s office market showed early signs of stabilization in the third quarter, with overall vacancy remaining unchanged quarter-over-quarter at 17.6% after seven consecutive quarters of increases. The rate remained up 30 basis points (bps) year-over-year (YOY) and quarterly absorption remained negative but improved to -29,720 square feet (sf). Together, slowing occupancy losses and declining sublease vacancy suggest improving market conditions, although performance varied considerably by geography. Reversing recent trends, Baltimore City recorded declining vacancy and positive absorption, while several suburban markets, particularly along the Baltimore-Washington corridor, continued to experience rising vacancy. This divergence reflects demand concentrating in premier assets while less competitive properties face greater vacancy pressure.
Baltimore City’s vacancy rate declined 20 bps YOY, driven by move-ins at newer developments in Harbor East and Baltimore Peninsula, while CBD vacancy remained near a historic high, rising 20 bps. New leasing activity in the city increased 22.5% over the preceding 12-month period. Quarterly new leasing was heavily concentrated in the public sector with the Maryland Department of Education accounting for 76.8% of new activity within the CBD, while Venable’s renewal preserved a significant private-sector occupancy. With no active construction in the city, continued tenant demand for premier buildings should further tighten the limited supply of top-tier space.
Suburban performance remains mixed. The Hunt Valley/I-83 North Corridor remained one the suburban market’s more active regions, as it captured 53.9% of Suburban North new leasing activity, supported by two transactions exceeding 15,000 sf, and recording a third consecutive quarter of positive absorption. Meanwhile, technology and security sector firms in southern submarkets continued to consolidate footprints while prioritizing premier inventory. The resulting occupancy losses pushed BWI Airport vacancy to a record high, 200 bps above the prior year.
